What is a Legal Representative?
According to Vietnam’s Law on Enterprise, a legal representative is an individual appointed to act on behalf of a company or organization.
This is primarily in legal matters and financial transactions. They are essentially the “legal” face of the company.
They have the authority to exercise and perform rights and obligations derived from the company’s transaction, represent it in court or arbitration as the plaintiff, defendant, or person with relevant interests and duties, apply for business licenses under the firm’s name, adjust its registered capital, open corporate bank accounts on its behalf, and perform other rights and obligations as prescribed by Vietnamese laws.
Who is eligible as a Legal Representative in Vietnam?
The Legal Representative must meet the following requirements:
- A foreign or a local individual;
- Must reside in Vietnam;
- Be at least 18 years old;
- Have the legal capacity to represent the company;
- Work in a managerial position or higher, depending on the type of the company;
- Have no bans on establishing or managing business in Vietnam, including no bankruptcy declarations; and,
- Must not be employed as a civil servant within any government agency or organization.
Enterprises must always ensure that they have a designated legal representative. It is mandatory for a firm’s legal representative to live in Vietnam. If this representative leaves the country, they must provide written authorization to another resident to act in their stead while remaining accountable for the authorized person’s actions. There are several ways to approach this:
- For sole proprietorships, the authorized representative can continue to act as the legal representative until the legal representative of the Company returns and/or terminates the authorization;
- For LLCs, joint stock companies, or partnerships, the authorized representative can continue to act as the legal representative until the following cases occur: (i) the legal representative of the Company returns; (ii) terminate the authorization; or (iii) until the enterprise designates a new legal representative; and,
- The court and other relevant authorities can appoint a legal representative to represent the company in court.
The enterprise’s governing body must appoint a new legal representative unless exempted under Clause 6 of Article 12 of the 2020 Law on Enterprise if an enterprise’s sole legal representative is absent from Vietnam for over 30 days without appointing an authorized representative or if they are deceased, missing, incapacitated, or facing legal issues.
Legal Representative’s duties
According to Article 13 of the 2020 Law on Enterprise, the following are a legal representative’s responsibilities:
Ensuring legal compliance
A legal representative is responsible for ensuring a firm is compliant with all relevant Vietnamese laws. In the event a firm is not compliant, then the legal representative may be held accountable.
Representing the company
When interacting with government authorities, clients, and partners, a legal representative plays a crucial role in upholding your enterprise’s credibility. They serve as a reliable point of contact, which fosters more reliable and trustworthy business transactions. As such, it is imperative for legal representative to transparently disclose their personal business interests and stakeholder roles.
A legal representative is also necessary for:
- Establishing a company (applying for a Business Registration Certificate);
- Establishing branches or representative offices;
- Dissolving a company;
- Changes to the Business Registration Certificate;
- Recording asset contributions to the registered capital upon request;
- Adjustments to the registered capital upon request;
- Maintaining a list of members or shareholders;
- Registration for offshore loans;
- Application for licenses;
- Filing tax returns; and,
- Opening bank accounts.
Legal representative and director’s distinctive responsibilities
A company can have both a Legal Representative and a Director or other managerial position, each with distinct roles and authority as specified in the company’s charter. While the Director primarily focuses on daily operational management, a Legal Representative is a position of significant authority.
*The director’s roles and responsibilities must be regulated within the company’s charter.
Legal liabilities and risks
The legal representative is personally liable for any harm caused to the enterprise within the scope of their responsibilities as specified in the company’s charter.
According to the Civil Code 2015, if a legal representative exceeds their authorization, any part of a transaction that goes beyond these limits will not create rights or obligations for the company unless the company;
- Agrees; or,
- Was aware of it but did not object within a reasonable time frame.
The other party in the transaction is not obliged to adhere if they do not know that the legal representative was acting outside their scope due to the company’s error. The other party has the right to terminate the transaction, rescind the part exceeding the legal representative’s scope of powers, and seek compensation for any losses.
However, if the other party was aware of the legal representative’s misconduct and proceeded with the transaction regardless, they cannot claim any compensation later.
FAQ: A Legal Representatives' Duties in Vietnam
Why is it important for an enterprise to have a legal representative?
It is essential for an enterprise to designate a legal representative to conduct legal transactions, represent the organization in legal matters, and fulfill legal obligations as required by the law.
Is it possible for an enterprise to have multiple legal representatives?
Yes, companies are allowed to delegate one or more legal representatives. However, the companies must clearly specify the roles and responsibilities of each legal representative.
What happens if the sole legal representative of an enterprise is absent or facing legal issues?
The legal representative shall authorize an authorized representative to continue to act on behalf in case of absent or the enterprise’s owner or governing body appoint a new legal representative in case of legal issues arise.
What are the qualifications and restrictions for a legal representative?
The legal representative must meet specific criteria. They can be a foreign or local individual, have a minimum age of 18 years old, working in a managerial position or higher, reside in Vietnam, have the legal capacity to represent the company, must not be under any ban preventing them from establishing or managing companies, and must not be employed as a civil servant within any government agency or organization.
Why is transparency important for a legal representative?
Transparency is crucial to ensure that the legal representative does not abuse their power and use the enterprise’s information for personal gain, which could harm the enterprise’s interests.